Fractal Analytics Seeks Rs 4,900 Cr in IPO Filing with SEBI

Fractal Analytics Limited has filed its Draft Red Herring Prospectus (DRHP) dated August 12, 2025, with the Securities and Exchange Board of India (SEBI) for an initial public offering (IPO) aggregating up to Rs 4,900 crore. The offer comprises a fresh issue of equity shares aggregating up to Rs 1,279.3 crore and an offer for sale of equity shares aggregating up to Rs 3,620.7 crore by existing shareholders, including Quinag Bidco Ltd, TPG Fett Holdings Pte. Ltd., Satya Kumari Remala and Rao Venkateswara Remala, and the GLM Family Trust. 

The company proposes to list its equity shares on BSE Limited and the National Stock Exchange of India Limited. Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited, Axis Capital Limited, and Goldman Sachs (India) Securities Private Limited are acting as the book-running lead managers to the offer, while MUFG Intime India Private Limited is the registrar to the offer.

Founded in 2000, Fractal Analytics Limited develops artificial intelligence and analytics solutions and provides engineering and design services to help businesses analyse data, improve decision-making, and enhance operations. 

How Will Fractal Analytics Use the Money?

Fractal Analytics will allocate the proceeds from its fresh issue across debt repayment, infrastructure, tech investments, and growth initiatives. The company intends to invest Rs 264.9 crore in its wholly owned subsidiary, Fractal USA, to prepay or repay a $32 million term loan. It will spend Rs 57.1 crore on laptops and Rs 121.1 crore to establish new office premises in India. The company earmarks Rs 355.1 crore to boost research and development, sales, and marketing under its “Fractal Alpha” programme.

Fractal designed Fractal Alpha as a brand to consolidate and scale its independent artificial intelligence businesses.

Fractal sets aside the remainder for potential acquisitions or strategic initiatives and general corporate purposes, each capped at 25% of gross proceeds and together limited to 35%. Should a pre-IPO placement of up to Rs 255.8 crore materialise, it will reduce the fresh issue size. Proceeds from the Offer for Sale will flow entirely to the selling shareholders.

Cap Table

Important Numbers

Fractal Analytics reported Rs 2,050.67 crore in operations revenue in FY25, up from Rs 1,758.79 crore in FY24 and Rs 1,441.27 crore in FY23. Total income stood at Rs 2,088.08 crore in FY25, compared to Rs 1,785.59 crore in FY24 and Rs 1,452.66 crore in FY23.

The company posted a profit after tax of Rs 175.04 crore in FY25, up from Rs 108.96 crore in FY24, marking a year-on-year increase of around 60.7%. In FY23, profit after tax was Rs 76.54 crore.

Fractal’s EBITDA reached Rs 341.27 crore in FY25, compared to Rs 256.65 crore in FY24 and Rs 207.61 crore in FY23. The company’s EBITDA margin improved to 16.65% in FY25, from 14.59% in FY24 and 14.41% in FY23.

As of March 31, 2025, the company’s net worth stood at Rs 1,517.38 crore, with total borrowings of Rs 391.08 crore.

Risk Factors for Fractal Analytics

Revenue Dependence on Key Customers

Fractal derived 26.86% of its revenue from operations in FY25 from its top five customers and 38.39% from its top 10 customers. The loss of any of these customers, or a material reduction in the services they purchase, could adversely affect its financial results. The company’s reliance on a concentrated customer base increases its exposure to changes in client priorities, budgets, or procurement policies.

Termination and Renewal Risks in Client Contracts

Many of Fractal’s customer contracts allow termination without cause and require the company to compete for renewal through bidding processes. This structure limits revenue visibility and exposes the company to competitive threats during each renewal cycle.

Heavy Dependence on the US Market

Fractal earned 69.21% of its FY25 revenue from operations from customers in the United States. Adverse economic, political, or regulatory changes in the US could materially affect its revenue and operations. Changes in immigration laws or visa restrictions could also disrupt the company’s ability to deploy staff for client projects in that market.

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Foreign Currency Fluctuation Exposure

With a substantial portion of revenue denominated in foreign currencies, especially the US dollar, Fractal Analytics is exposed to currency fluctuations. The DRHP states that a 1% change in exchange rates would have impacted profit after tax in FY25 by Rs 13.85 crore. While the company uses hedging to mitigate this risk, such measures may not fully offset adverse movements.

Intense Industry Competition

Fractal operates in a highly competitive analytics and AI market, facing competition from global consulting firms, specialised analytics providers, and technology companies. Competitors with greater financial, technical, and marketing resources may be able to offer lower prices, broader services, or more advanced solutions, which could reduce Fractal’s market share and profitability.

Dependence on Skilled Workforce and Key Personnel

The company’s success depends on retaining its senior management team, including its co-founders, and attracting and retaining skilled professionals. Inability to secure such talent, or loss of key personnel, could impair Fractal’s delivery capability and strategic execution.

Data Security and Privacy Compliance Risks

Fractal processes sensitive data for clients across multiple jurisdictions. Any breach of its IT systems or failure to comply with data privacy laws could result in legal penalties, contractual liabilities, and reputational damage. Compliance with diverse and evolving regulations increases operational complexity and costs.

Acquisition and Integration Challenges

Fractal pursues acquisitions as part of its growth strategy. Acquired businesses may be difficult to integrate, not perform as expected, or divert management attention from core operations. Failure to achieve anticipated synergies could reduce profitability and slow growth.

Ethical and Responsible AI Concerns

The company designs and deploys AI models for clients and acknowledges that these AI systems can produce biased or unintended outcomes. Such outcomes could damage its reputation, result in client dissatisfaction, or trigger legal and regulatory challenges. Evolving regulatory frameworks for AI may impose additional compliance costs and operational requirements.

Dependence on Technology Infrastructure

Fractal Analytics relies on continuous access to its IT infrastructure and third-party cloud platforms for service delivery. System outages, cyberattacks, or inadequate disaster recovery planning could disrupt operations, delay projects, and harm client relationships.

The company also identified other risks in its DRHP, including reliance on certain suppliers, potential changes in tax laws, the impact of financial market volatility on share value, the need to protect intellectual property, competition for acquisition targets, and the possibility of shareholder dilution through future equity issuances.

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